Vermont Senator Calls for Crackdown on Pharmaceutical Fraud

Saying there is a “culture of fraud” in the pharmaceutical industry, Sen. Bernie Sanders (I-Vermont) has proposed tough new penalties against drug makers found guilty of fraud and off-label marketing of medication. Sanders’ amendment to a Food and Drug Administration bill would take away the company’s exclusive marketing rights to the drug in question– potentially worth hundreds of millions of dollars.

“Companies that are fined for overcharging Medicare or Medicaid, or for dangerous illegal marketing practices, should not enjoy government-granted monopolies on those same medications,” Sanders said.

According to a 2010 Public Citizen study, the drug industry surpassed the defense industry as the biggest defrauder of the federal government. Pharmaceutical companies accounted for nearly half – $1.8 billion out of $4.1 billion — of the penalties collected in 2011 by the Health Care Fraud and Abuse Control Program. This year, drug makers are expected to pay up to $9 billion in fraud settlements, according to Taxpayers Against Fraud.

The penalties pale in comparison to the huge revenues generated by the companies. The top-12 pharmaceutical companies made $49.1 billion in profits in 2011, according to Sanders’ office, with Pfizer making $10 billion and Johnson & Johnson making $9.7 billion.

“The penalties these companies pay when they are caught and prosecuted simply aren’t big enough to stop them from being repeat offenders,” Sanders said.

Pfizer, which paid $49 million to settle charges that a subsidiary defrauded the Medicaid program by overcharging for the cholesterol-lowering drug Lipitor.

A division of Pfizer pleaded guilty to two felonies and agreed to pay $430 million to settle charges that it fraudulently promoted the drug Neurontin for a string of unapproved uses.

GlaxoSmithKline, which in 2011 reached an “agreement in principle” to pay $3 billion in penalties for illegal sales and marketing practices for a diabetes drug that was severely restricted after it was linked to heart risks.

Merck agreed to pay a $670 million settlement in 2009 for fraud on patients and Medicare/Medicaid involving a conspiracy with hospitals to give the elderly cheaper drugs while charging them for a more expensive medication.

Merck in 2011 pleaded guilty to a criminal misdemeanor charge and paid a $950 million settlement for illegally promoting Vioxx for rheumatoid arthritis before that use was approved.

Johnson & Johnson last year illegally marketed Risperdal, an anti-psychotic medication, to nursing home patients, and paid over $2 billion in fines.

“And on and on it goes,” Sanders said. “The bottom line is that the pharmaceutical industry is making money hand over fist while it systematically defrauds taxpayers, all the while individuals in the United States are not getting the medicines they need because they cannot afford them.”

Sen. Mike Enzi (R-Wyoming) spoke against the Sanders amendment on the Senate floor, saying it was counter productive and could produce “absurd results.” Enzi said the proposed penalty of losing marketing rights was so severe it would discourage pharmaceutical companies from developing new drugs and treatments. Companies would also be less likely to agree to settlements with the Justice Department and would appeal judgements against them, according to Enzi.

The Senate is debating reauthorization of the FDA’s Prescription Drug User Fee Act. Under the legislation, the FDA would get new powers to police imported drug ingredients and inspect overseas facilities. Drug makers would also be required to report production problems that could lead to drug shortages. The partisan gridlock that has plagued Congress on other issues is missing on this one, for the most part. The Senate and House have produced two very similar bills in recent weeks and the legislation is expected to be sent to President Obama by the end of June.